Eric, what happens if libvirt in an selinux environment tells QEMU to
launch using an image file that is backed by backing file(s)?

Before starting qemu, libvirt first parses all the image files, to see
if any of them have backing images. For every qcow2 or qed image with a
backing file, libvirt sets the SELinux context of both the qcow2 image
and its backing file so that qemu will be able to successfully open()
them. But if any of those files reside on NFS, then it is not possible
to label individual files, so it requires setting the SELinux bool
virt_use_nfs, which thus gives qemu the power to open() arbitrary files
on NFS, and you've lost security.

But even if you add new features to qemu to avoid needing this in the
future, it doesn't change the past - libvirt will always have to know
how to parse image files understood by older qemu, and so as long as
libvirt already knows how to do that parsing, we might as well take
advantage of it.

Besides, I feel that having a well-documented file format, so that
independent applications can both parse the same file with the same
semantics by obeying the file format specification, is a good design goal.

It would be nice if libvirt had a way to pass fds for every disk and
backing file up front; then, SELinux can work around the lack of NFS
per-file labelling by blocking open() in qemu. In fact, this has
already been proposed:

A cleaner solution seems to have libvirt provide a call-back allowing
QEMU to call out and have libvirt open a file descriptor instead. This
way libvirt can validate it and open it for QEMU and pass it back.

Yes, that could probably be made to work with libvirt.

If we cannot do something like this, I would prefer to have backing
files on NFS should simply not be supported when running in an selinux
setup.

As nice as that sentiment is, it will never fly, because it would be a
regression in current behavior. The whole reason that the virt_use_nfs
SELinux bool exists is that some people are willing to make the partial
security tradeoff. Besides, the use of sVirt via SELinux is more than
just open() protection - while the current virt_use_nfs bool makes NFS
less secure than otherwise possible, it still gives some nice guarantees
to the rest of the qemu process such as passthrough accesses to local
pci devices.

Just because it is currently not as secure to mix NFS shared storage
with backing files doesn't stop some people from wanting to do it [in
fact, that's my current development setup - I use qcow2 images on NFS
shared storage, keep SELinux enabled, and enable the virt_use_nfs bool].
This discussion is about adding enhancements that make SELinux even
more powerful when using NFS shared storage, by adding fd passing
(whether libvirt parses in advance, or whether qemu raises an event and
requires feedback from libvirt), and not about crippling the existing
capability to use the virt_use_nfs selinux bool.